A court ruling against a Pennsylvanian county threatens the future of employer-sponsored retiree medical schemes, according to Rich Ostuw, global practice director of group and health care consulting at Watson Wyatt.
The US District Court for the Western District of Pennsylvania last month ruled that Erie County violated the Age Discrimination in Employment Act (ADEA) and failed its equal benefits code by providing lesser benefits to Medicare-eligible, post-65 retirees than to early retirees who were not eligible for Medicare.
Erie County offered younger retirees a health care plan that allowed them to go outside a prescribed network of doctors for care, although they pay more for this. Older retirees, however, were covered through a health maintenance organisation that required them to only select doctors within a defined network, even though their total contribution was greater than that for pre-65 retirees.
Unfortunately, there's no quick fix - and the alternatives are unattractive, said Ostow.
Increasing lifetime benefits for older retirees is a very costly proposition, and most employers are reluctant to increase costs in today's economic climate. Reducing benefits for pre-65 retirees is equally unappealing”, he added.
The court ruling also affects employers in New Jersey, Delaware and the Virgin Islands. But according to Ostuw, the ruling sets a precedent that is likely to have national implications.
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